HP turnaround progressing as profit forecast tops estimates

Hewlett-Packard Co., the largest personal-computer maker, forecast fiscal second-quarter profit that exceeded analysts’ estimates, helped by cost-cutting measures and a smaller-than-projected drop in service sales.

Profit, excluding some items, will be 80 cents to 82 cents a share for the current quarter, which ends in April, the Palo Alto, California-based company said a yesterday. That beat analysts’ average 77-cent estimate, according to data compiled by Bloomberg. The shares rose the most in more than a year.

Hewlett-Packard is using job cuts to bolster profit as demand for printers and personal computers slumps and companies curtail purchases of higher-margin hardware and software. Chief Executive Officer Meg Whitman said she feels “pretty good” about fiscal 2013 and reaffirmed a prediction that the company will resume growth next year, evidence of progress on a five- year turnaround plan even as competitive pressures linger.

“They seem to be managing the restructuring better than we had expected -- it’s still a work in progress,” said Shannon Cross, an analyst at Cross Research, based in Livingston, New Jersey.

Fiscal first-quarter revenue fell 5.6% to $28.4 billion, compared with analysts’ average estimate of $27.8 billion. Profit, excluding amortization, restructuring and other charges, was 82 cents a share, compared with the 71-cent prediction. Net income fell 16% to $1.23 billion, or 63 cents a share, from $1.47 billion, or 73 cents, a year earlier.

“I feel pretty good about the rest of the year,” Whitman said in an interview. “I think we are beyond the announcements about the writedowns and restructuring.”

Share Jump

The shares rose 8.1% to $18.49 at 9:34 a.m. in New York, and earlier touched $18.60 for the biggest intraday gain since September 2011. Hewlett-Packard had advanced almost 2% in the last hour to close at $17.10 yesterday. Almost 4.29 million shares traded in that timeframe, three times the average volume seen during the same period in the past five trading days.

“To me, it looks like someone had to have known something,” Frank Ingarra, head trader at Greenwich, Connecticut-based NorthCoast Asset Management LLC, said in a telephone interview. His firm oversees $1.4 billion. “There’s huge volume. I would be skeptical to think that someone didn’t have any idea.”

John Nester, a spokesman for the U.S. Securities and Exchange Commission, declined to comment on whether the agency was reviewing trading ahead of the announcement.

The stock has climbed 46% since Nov. 20, when the company disclosed an $8.8 billion writedown on the value of software company Autonomy Corp., which it agreed to buy for $10.3 billion in 2011.